Archive for category Oil

A consensus has emerged since the death of King Abdullah of Saudi Arabia that the kingdom will not change course on oil policy. This consensus is probably right, at least for the short term. It is, however, correct for reasons other than the ones that most observers have invoked.

Moreover, while it looks unlikely that the kingdom will alter oil production in the coming months, barring a major change of heart of non-OPEC producers, interesting changes to Saudia Arabia’s cabinet roster and other energy policies and could be closer than most realize.

The basis of the conventional wisdom is rooted in personalities. New King Salman bin Abdulaziz has pledged continuity, stating he will adhere to the “correct policies” of his predecessors. He also said that oil minister Ali Al-Naimi will stay in his post. Read the rest of this entry »

The revised 2015 Budget should declare war on corruption, incompetence and extravagance to provide example and leadership of government commitment to austerity, accountability and integrity.

Such a campaign would save the Malaysian government and taxpayers scores of billions of ringgit, which would help the country tide through the looming economic crisis as a result of the sharp fall in prices of oil and commodities and the weakening of the Malaysian ringgit.

Despite the greatest investment in anti-corruption campaign, with the Malaysian Anti-Corruption Commission developing into a huge bureaucracy but with very little to show in terms of results, the Najib premiership is still far behind the Abdullah and Mahathir premierships in both ranking and score of the annual Transparency International (TI) Corruption Perception Index (CPI).

Malaysia lags seriously behind other countries in the battle against corruption, particularly Indonesia and China, and Malaysia is at risk of being overtaken by these two countries which had occupied the bottom two of rungs of the TI CPI 1995 two decades ago in a matter of a decade.Read the rest of this entry »

The question the Prime Minister, Datuk Seri Najib Razak must answer is why he is not convening a special meeting of Parliament to present the restructuring of the 2015 Budget.

As it is Parliament which approved the RM273.9 billion 2015 Budget, it is only right and proper, fully in accord with the principle of parliamentary democracy, that Najib should convene a special Parliament to present the restructured 2015 Budget because of the weakening of ringgit and the plunging oil prices.

It is not too late for Najib to do what is right, and convene a special meeting of Parliament to present the revised 2013 Budget as a special Parliament can be convened even within 48 hours. Otherwise, Najib would be showing utter contempt to Parliament and the principle of parliamentary democracy. Read the rest of this entry »

As an energy-deficient country whose import bill for oil in the last financial year stood at $150 billion, the sharp fall in oil prices is a moment to celebrate. There are two ways to celebrate. One could be to open the champagne bottle and enjoy the good things in life. Then, there is a second way – the Chinese way – which is to seize the happy hour to plan for the future.

The Indian government is sipping champagne. The budget deficit significantly narrows and that is good news for the upcoming annual budget. A Morgan Stanley report in September calculated that a mere 10 percent drop in oil price could bring down the current account deficit by 0.6 percent of India’s GDP – no small matter.

However, how is the government taking advantage of the unexpected windfall? Plainly put, the benefit has not been passed on to the consumer. Whereas in the US, the average gasoline prices have reached their lowest level in the past four-year period, there is no such luck for the Indian consumer. Worse still, the government’s price fixation method is so opaque that a suspicion forms that private oil companies are being enabled to make huge profits. Read the rest of this entry »

Fears are growing over the systemic impact of the corruption scandal at Petrobras, Brazil’s state oil producer, as one of the construction firms linked to the allegations edges closer to default and the country’s credit rating comes under pressure.

OAS, which is building the world’s third-largest dam and revamping São Paulo’s international airport, has missed two debt payments over the past week after the scandal restricted its access to funding, forcing it to preserve cash to pay for operations.

Analysts said that similar difficulties across Brazil’s construction and oil industries could have knock-on effects on the world’s second-largest emerging market economy, especially if Petrobras itself cannot regain access to capital markets.

“The risk is that the government would have to provide financial support to Petrobras in the event of an acceleration of debt,” Mauro Leos, Moody’s sovereign analyst for Brazil, told the Financial Times. Such a scenario “could lead to a credit event”, affecting Brazil’s sovereign credit rating, he added.

The warning comes as President Dilma Rousseff is battling to protect Brazil’s coveted investment grade rating with a series of market-friendly measures — efforts that could be obscured by the prospect of bailing out Petrobras, Mr Leos said.

With more than $139bn in total debt, Petrobras ranks as the world’s most indebted oil producer, but it retains an investment grade credit rating. Read the rest of this entry »

The retail prices for fuel in the country will be reduced between 30 sen and 35 sen from tomorrow following the downtrend in global crude oil prices, said Deputy Finance Minister Datuk Ahmad Maslan today.

He tweeted that RON95 petrol will be priced at RM1.91 a litre, a reduction of 35 sen, RON97 at RM2.11 a litre (35 sen drop) and diesel at RM1.93 a litre (30 sen drop). Read the rest of this entry »

In 2008, I moved to Dallas to cover the oil industry for The Wall Street Journal. Like any reporter on a new beat, I spent months talking to as many experts as I could. They didn’t agree on much. Would oil prices — then over $100 a barrel for the first time — keep rising? Would post-Saddam Iraq ever return to the ranks of the world’s great oil producers? Would China overtake the U.S. as the world’s top consumer? A dozen experts gave me a dozen different answers.

But there was one thing pretty much everyone agreed on: U.S. oil production was in permanent, terminal decline. U.S. oil fields pumped 5 million barrels of crude a day in 2008, half as much as in 1970 and the lowest rate since the 1940s. Experts disagreed about how far and how fast production would decline, but pretty much no mainstream forecaster expected a change in direction.

That consensus turns out to have been totally, hilariously wrong. U.S. oil production has increased by more than 50 percent since 2008 and is now near a three-decade high. The U.S. is on track to surpass Saudi Arabia as the world’s top producer of crude oil; add in ethanol and other liquid fuels, and the U.S.is already on top. Read the rest of this entry »

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Just when Malaysia was beginning to plug the holes in its public finances, the prospect of a sharp reduction in oil revenue is threatening to undermine fiscal progress and weaken the currency.

Petronas is playing spoiler. The state energy company recently warned that its contribution to the government’s exchequer – in the form of dividends, taxes and royalties – could slide 37 percent next year from an estimated 68 billion ringgit ($20 billion) in 2014.

Such a shortfall in the main source of government’s oil-and-gas revenue would easily exceed 2 percent of GDP. That would wipe out the 1.7 percent of GDP in annual savings the government hopes to achieve by scrapping domestic fuel subsidies from Dec. 1.

The fiscal hit could be even larger if oil prices next year remain below the $75 a barrel on which Petronas based its forecast. That would threaten the government’s target of reducing the budget deficit to 3 percent of GDP, from an estimated 3.5 percent this year.

The finance ministry is refusing to give up on the 2015 target just yet. It may hope that Petronas can be persuaded to make a less drastic cut in its dividend payment. Read the rest of this entry »

Oil is a key economic input and its price has fallen sharply. All things being equal, that’s a plus for global growth, but the markets are in turmoil. Here are six key reasons why oil’s price plunge has the markets gyrating.

THIS IS AN OIL PRICE SHOCK

In 2011, 2012 and last year oil averaged $US95.13 a barrel, $US94.15 a barrel and $US98.05 a barrel respectively, a spread of just $US3.90. It averaged $US100 a barrel in the first six months of this year and got to $107.26 a barrel on June 20. Monetary policy was still loose and the consensus was that the oil price would not move sharply in either direction.

Instead, it tipped into an accelerating price slide, to about $US75 a barrel ahead of last week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC). It hit $US66.15 a barrel on Monday, after the world’s biggest producer, Saudi Arabia, failed to back OPEC production cuts, and was still below $US70 a barrel on Tuesday despite a 3 per cent-plus bounce. Investors didn’t see the price slide coming, and haven’t worked out what it means. Read the rest of this entry »

Remember way back in June, when oil was $115 a barrel? Now it’s trading at around $67.90 a barrel for Brent crude and some analysts are predicting, given the right conditions, it could tumble to as low as $40 a barrel.

Weak demand, a strong U.S. dollar and booming U.S. oil production are the three main reasons behind the fall, according to the International Energy Agency (IEA), which warned of a “new chapter” for oil markets, which could even affect the social stability of some countries. Russia is already feeling some pain: the ruble tumbled about 4 percent on Monday, on course for its biggest daily drop since the 1998 financial crisis.

Saudi Arabia sparked talk of an oil price war as it has cut its official selling prices for some customers for four consecutive months through November. Part of oil’s drop has to do with supply conditions. Increased U.S. oil production has added to a glut in the world oil market. The U.S. now produces about 8.9 million barrels a day, while Saudi Arabia, the world’s largest producer, pumps about 9.6 million barrels a day. Read the rest of this entry »

It’s looking like Monday’s spike in oil prices was little more than a blip.

The price of oil fell again on Tuesday after experiencing a brief rebound to start the post-holiday week. Crude oil prices gained as much as roughly 4% yesterday, rebounding from five-year lows, before falling again today. Prices for Brent crude oil are recently down about 2.3%, to $70.83, while West Texas Intermediate (WTI) is down 1.8%, to $67.26.

SINGAPORE: Offshore drillers globally are increasingly considering “warm stacking” their rigs to take them temporarily off the market, as they gear up for a slowdown in the hunt for oil with crude prices sliding to five-year lows.

Rigs in warm stack maintain basic operations and most of the crew, and can be put to use once the owner gets a contract. Drillers put rigs in warm stacks to lower operational costs and also to keep them sufficiently ready for quick deployment, meaning they are hopeful a downturn won’t be a prolonged one.

Rigs can also be “cold stacked”, or shut down, which typically happens when an owner does not expect to find work for an extended period of time.

Oil prices have fallen about 40 percent in the past six months, with international benchmark Brent dropping below $68 to a five-year trough and nearing the marginal production cost of the most expensive offshore projects.

“Six months ago, no one talked about stacking rigs,” said Thomas Tan, chief executive officer at Kim Heng Offshore & Marine Holdings Ltd, a Singapore-based oilfield service firm, “In the last few weeks, things have become scarier and the talk of stacking started.” Read the rest of this entry »

KUALA LUMPUR, Dec 2 — The recent global oil price slump has affected both Putrajaya and domestic oil and gas (O&G) industry which depend heavily on Petroliam Nasional Bhd (Petronas), after the local giant decided to slash its dividends and capital expenditure.

In the aftermath of the slump, media reports revealed declines in the ringgit, local stock market, and net worth of industry players including billionaires Tan Sri Robert Kuok and T. Ananda Krishnan, and even Tan Sri Mokhzani Mahathir.

With the US crude oil prices at a five-year low, Petronas Chief Executive Tan Sri Shamsul Azhar Abbas told reporters on Friday after the that payments to the government in the form of dividends, tax and royalties could be 37 per cent lower from the previous year to about RM43 billion in 2015 if oil stays around US$75 (RM275) a barrel.

As a result, Malaysia’s ringgit headed for its biggest two-day decline since the 1997-98 Asian financial crisis yesterday. Read the rest of this entry »

PETALING JAYA, Dec 2 — With RON97 now only 20 sen more expensive than RON95, more Malaysians are now able to purchase it.

In 2012, both fuels used to have a price difference of RM1 per litre.

But what exactly is the difference between RON 95 and RON97 besides the price?

RON stands for Research Octane Number, a form of fuel quality and performance rating.

The rating system was developed by Russell Marker at American firm Ethyl Corporation in 1926, following Marker’s discovery that branching in hydrocarbons reduced “knocking”, or pre-ignition. Read the rest of this entry »

CAMBRIDGE – The price of oil has fallen more than 25% in the past five months, to less than $80 a barrel. If the price remains at this level, it will have important implications – some good, some bad – for many countries around the world. If it falls further, as seems likely, the geopolitical consequences on some oil-producing countries could be dramatic.

The price of oil at any time depends on market participants’ expectations about future supply and demand. The role of expectations makes the oil market very different from most others. In the market for fresh vegetables, for example, prices must balance the supply and demand for the current harvest. By contrast, oil producers and others in the industry can keep supply off the market if they think that its price will rise later, or they can put extra supply on the market if they think the price will fall.

Oil companies around the world keep supply off the market by reducing the amount of oil that they take out of the ground. Oil producers can also restrict supply by holding oil inventory in tankers at sea or in other storage facilities. Conversely, producers can put more oil on the market by increasing production or by running down their inventories. Read the rest of this entry »

Welcome back from Thanksgiving week. Apparently OPEC did something and oil prices plunged. If you were as out of touch with it all as I was last week, here’s a rundown.

As we tucked into Turkey and football last Thursday, OPEC announced no output cut, no target price and no output ceiling. Sounds like a lot of no news, but the OPEC meeting has been described in historic terms. Bloomberg’s headline declared that war had broken out: “Oil enters new era as OPEC faces off against shale; who blinks as price slides toward $70?” The accompanying article made the case that OPEC is indubitably locked in a price war against U.S. shale producers.

Oil prices plunged on the OPEC news. West Texas Intermediate crude is now at $65 a barrel. It was $107 back in June.

That Bloomberg article had my favorite quote of the week, from Leonid Fedun, a board member at Russia’s Lukoil. Fedun said that by maintaining output levels, OPEC would bring about an outright crash among U.S. shale drillers. “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

(Reuters) – Brent crude oil fell more than $2 a barrel to a five-year low below $68 on Monday as investors looked for a price floor after last week’s OPEC decision not to cut production.

Both U.S. crude and Brent have fallen for five straight months, oil’s longest losing streak since the 2008 financial crisis.

“The market is still very much in panic mode,” said Energy Aspects’ chief oil analyst Amrita Sen. “Once we get over the panic, Brent prices will probably stabilise at around $65-80 a barrel in the short term.”

Saudi Arabia, the most influential member of the Organization of the Petroleum Exporting Countries last week blocked moves by some smaller producers to curb oil output in response to huge oversupply in world markets.

Brent hit a low of $67.53 a barrel, the lowest since October 2009, and was down $1.42 at $68.73 a barrel by 9.21 a.m. . U.S. crude fell $1.45 to $64.70 a barrel, having slipped to an intraday low of $63.72, the lowest since July 2009.

While Americans were stuffing their faces with poultry Thursday, global oil markets were in chaos. And the implications are far-reaching.

The price of oil was down more than 9.9 percent Friday afternoon after the Organization of the Petroleum Exporting Countries decided it would not cut back production significantly in the months ahead.

In other words, even amid a sluggish global economy and a boom in oil production in the United States, oil-producing countries from Saudi Arabia to Nigeria to Venezuela are going to keep pumping rather than pull back on output in hopes of pumping prices back up.

The latest decline pushes oil prices in the United States under $70 a barrel; the prices were more than $100 for almost all of July. And the latest OPEC move (or non-move, as it were) suggests that it isn’t going to reverse course anytime soon. Read the rest of this entry »

With the black stuff cheaper than it has been in years, Europe’s governments must invest in their infrastructure

For the past 18 months, the world’s biggest oil producer has been the US. Saudi Arabia, eat your heart out. Courtesy of the fracking revolution, the US will maintain this new standing for the foreseeable future, according to official projections.

The world as we’ve known it for the past 50 years is being stood on its head. Which provides cause for optimism. But an international landscape increasingly dominated by nationalist firebrands, conservative zealots and policy makers in thrall to austerity economics is always apt to waste opportunities.

One first good result of this oil price shift, however, was witnessed at Opec’s meeting in Vienna last week. The once feared cartel of oil-exporting countries, with Saudi Arabia at its core, a cartel that at one time commanded more than half of global production, is now a shadow of its former self. Opec’s members were unable to agree to cut production because most are strapped for cash and had no choice but to maintain levels.

With the US needing to buy less oil on international markets and China’s growth sinking to its lowest mark for 40 years, there is now, amazingly, the prospect of an oil glut. The oil price instantly nosedived to its lowest level for four years, around $70 a barrel – down more than a third in three months. Read the rest of this entry »

Every swing in commodity values has winners and losers, but here there are many more winners

The fall in the oil price is big. It is big in terms of the raw numbers, a decline on the Brent reference price from above $115 (£74) a barrel as recently as June, to below $73 on Friday. We are starting to see that feed through to heating oil and the price at the pumps. But more important is the impact it has on the world economy. This is the biggest single thing that has happened in the past six months – and it comes in the nick of time, making the recovery in the developed world much more secure. Whenever there is a big swing in prices there are winners and losers, but the winners far outnumber the losers.

The basic point here is that high energy prices are like a tax on global growth. The oil price affects all energy prices and the more money that flows to the producers, the less there is in the consuming nations to spend on other goods and services. Read the rest of this entry »